 Delegated recruitment and statistical discriminationStepan Aleksenko and Jacob Kohlhepp Journal of Economic Theory, 2024, vol. 222, issue C Abstract: We study how delegated recruitment shapes talent selection. Firms often pay recruiters via refund contracts, which specify a payment upon the hire of a suggested candidate and a refund if a candidate is hired but terminated during an initial period of employment. We develop a model of delegated recruitment and show that refund contracts with strong screening incentives lead to statistical discrimination in favor of candidates with more precise productivity information. This contrasts with a first-best direct-hiring benchmark, where the firm has option value from uncertain candidates. Under tractable parametric assumptions, we provide a closed-form expression for the unique equilibrium contract and show that it features strong screening incentives. As a result, candidates with lower expected productivity but more informative signals (“safe bets”) are hired over candidates with higher expected productivity but less informative signals (“diamonds in the rough”). Keywords: Delegation; Contracts; Recruiters; Screening; Discrimination (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:222:y:2024:i:c:s002205312400142x DOI: 10.1016/j.jet.2024.105936 Access Statistics for this article Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell More articles in Journal of Economic Theory from Elsevier |
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